The content of the financial promotions on this website has not been approved by an authorised person within the meaning of the Financial Services and Markets Act 2000. Reliance on these promotions for the purpose of engaging in investment activity may expose an individual to a significant risk of losing all of the property or assets invested.

February 20, 2024

Navigating Tax Challenges: Why UK Landlords Should Consider IFISAs for Property Investment

In recent years, buy-to-let landlords in the UK have faced increasing financial pressures due to evolving tax legislations. Amidst these challenges, Innovative Finance ISAs (IFISAs) emerge as a promising alternative, offering tax-efficient avenues for property investment.

Padraigh Kinnaird, Acorn Property Invest
By Padraigh Kinnaird
Share on:

The Tax Burden on Buy-to-Let Landlords

The landscape for UK landlords has undergone significant changes, particularly in taxation. The reduction in mortgage interest relief, introduced in April 2017, has progressively limited tax relief for interest on buy-to-let mortgages to the basic rate of income tax. Additionally, the 3% surcharge on stamp duty for second homes and rental properties, effective from April 2016, has further squeezed the profitability of buy-to-let investments. Statistics from the National Landlords Association suggest that these changes have led to a noticeable decline in net profits for landlords, with some areas witnessing up to a 20% decrease in returns.

Understanding Innovative Finance ISAs (IFISAs)

IFISAs, introduced in April 2016, represent a modern solution to these challenges. Unlike traditional ISAs, IFISAs allow investors to use their annual ISA allowance to lend funds through the peer-to-peer (P2P) lending platforms, often tied to property investments. The key advantage of IFISAs lies in their tax efficiency; interest earned through IFISAs is tax-free, making them particularly attractive for higher-rate taxpayers.

The Benefits of IFISAs for Property Investment

For landlords and property investors, IFISAs offer several compelling benefits. Firstly, the potential returns from IFISAs can be significantly higher compared to traditional savings accounts or even some buy-to-let investments. For instance, data from leading P2P platforms in the UK indicate average annual returns of 4-6%, which can be particularly appealing in the current low-interest-rate environment. Investors should be aware that there is a risk of capital loss and should always do their due diligence when engaging with peer-to-peer lending.

Moreover, IFISAs provide a degree of flexibility and risk diversification that is often lacking in direct property investments. Investors can spread their funds across multiple loans and properties, thereby mitigating the risk associated with individual investments. Furthermore, the tax advantages of IFISAs amplify their appeal, especially when juxtaposed with the increasing tax burdens on direct property investments.

Invest through an IFISA today

As the UK's taxation landscape continues to evolve, it becomes increasingly important for landlords and potential property investors to explore alternative investment avenues. IFISAs offer a tax-efficient, flexible, and potentially lucrative option, making them an investment vehicle worth considering in the current economic climate. By diversifying into IFISAs, investors can not only navigate the complexities of property investment but also potentially enhance their overall returns. As always, ensure that due diligence is completed before investing through a P2P platform.

For further details on how you can leverage this avenue for a hassle-free and tax-efficient property investment experience, register now to explore the offerings and gain insights into maximising your financial returns.


Investment opportunities available via Acorn Property Invest are exclusively targeted at exempt investors who are experienced, knowledgeable and sophisticated enough to sufficiently understand the risks involved, and who are able to make their own decisions about the suitability of those investment opportunities. All investors should seek independent professional investment and tax advice before deciding to invest. Any historic performance of investment opportunities is NOT a guide or guarantee of future performance and any projections of future performance are not guaranteed. All investment opportunities available via Acorn Property Invest are NOT regulated by the Financial Conduct Authority (FCA) and you will NOT have access to the Financial Services Compensation Scheme (FSCS) and may not have access to the Financial Ombudsman Service (FOS).